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What Does Motoroogle Mean?

I am really quite relieved Google is trying to acquire Motorola Mobility. Not because I think it will solve all the problems of Android – it's far too early to say anything like it; but simply because, at last, Google has done something that might begin to address them.

I was fast coming to the view that Google was, if not completely clueless in the face of multiple patent assaults on its Android platform, at least pretty rudderless. When it eventually lost the battle for Nortel – after offering the most absurd bids that involved things like pi billion dollars – I really doubted it had any idea how serious things were getting.

Google just sandbagged its rivals. The whole thing was a rope-a-dope maneuver. Google never cared about the Nortel patents. It just wanted to drive up the price so that AppleSoft (those happy new bedmates) would overpay. Today, with the Motorola deal, Google picks up nearly three times as many patents as AppleSoft got from Novell and Nortel. More important, Google just raised the stakes in a huge way for anyone who wants to stay in the smartphone market.

This sounds plausible to me. The weird bids that Google made in the Nortel auction were partly a way for it to confuse people (that certainly worked with me...) and also a marker left so that it would be able to claim in retrospect that even though it was run by supposedly unworldly PhDs, Google had managed to outmanoeuvre some of the shrewdest players in the business.

Moreover, the agreed price – about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares last Friday – isn't actually as steep as it looks:

it will immediately get back some $3bn in cash from Motorola Mobility, as well as an undisclosed amount of tax advantages that can be used to lower the amount of taxes that the wildly profitable search giant will face in the future. Even setting aside the very real tax breaks, Google is on the hook for just $9.5bn for Motorola Mobility.

Compare that with the final $4.5 billion that was paid for the Nortel patents in a complicated deal involving six companies, and even on the crudest of metrics, Google's acquisition of Motorola doesn't look too bad. But of course, this isn't about numbers, it's about the details of what's going on here, and what the knock-on effects will be, not least for open source.

The possible ripple effects are not just huge, but contradictory. For example, a big issue will be how Google manages to run Motorola's handset operations without upsetting its other partners. I don't think either of the two obvious options – sell it, or just run it as a subsidiary – really works.

I don't know how Google will square the circle on this one, but I would hope that it comes up with a surprising solution. Because if it doesn't, we could probably expect Microsoft's Windows Phone platform to benefit as handset manufacturers flee from Motoroogle's unfair advantage in the Android market.

That's one possible outcome, but another might be that Microsoft buys Nokia. That makes a lot of sense: the two companies are already working together – OK, Microsoft is already more or less running Nokia – so the integration would be much easier than it would be if Google tried to do the same with Motorola. Nokia would bring with it a huge patent portfolio that would probably match the one that Motorola possesses (I keep hearing differing views on who has what, and which is better, so I'll just assume they are both quite impressive.) Moreover, it would allow Microsoft to integrate software and hardware in exactly the same way that Apple (and maybe Google) will do.

Of course, if Microsoft does that, it would then lose all the possible goodwill from those poor confused handset manufacturers, who would probably just stick with Android rather than switch to Windows Phone and compete with Microsoft, not known as a particularly merciful opponent.

Those are all interesting what-ifs, and others have raised interesting points about implications for Google Voice, Google TV and even the Oracle Java lawsuit, but the central question arising from this acquisition has been clear to everyone: will the patents that Google gains with Motorola be enough to ward off the attacks on Android and the handset manufacturers that have adopted it?

Again, I think it is far too early to attempt to answer this one. Much depends on what Microsoft does: for example, if it bought Nokia, that would change the patent landscape once more. Similarly, Apple is sitting on so much cash at the moment it might easily step in a buy even more patents to counter Google's move (I even wonder whether it might make some absurd offer – say $25 billion – to snatch Motorola from Google....)

But already, I think one thing is clear: Google has lost its battle to ignore patents. By paying a not inconsiderable sum for a company that holds a major patent portfolio, Google has essentially waved the white flag on that one – although that's perhaps the wrong metaphor, because Google has presumably bought those assets in order to attack those attacking Android.

In other words, we are about to enter into a new, even more insane phase of the use of software patents to waste companies' energies in pointless litigation rather than true innovation. Those $12.5 billion that Google hopes to pay for Motorola will now not be used to come up with exciting new services in the Google labs. The $4.5 billion paid by the consortium for the Nortel patents has to come from money that would otherwise have been spent on research and development among other things.

This is all money that is being taken out of worthwhile business activities just to stuff down the ravenous maw of the patent monster. Google's move may or may not help protect Android, but it has certainly chucked the ogre a big new gobbet to feed on.

Ironically, as more and more millions go down the drain in punitively expensive but ultimately pointless legal actions, this may actually accelerate the long-needed reform of this entire area, simply to put a halt to the mutual assured destruction that is taking place there. Until then, we can be sure that all of us, as customers, will suffer from the reduced innovation and increased prices that this continuing patent insanity will cause.

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